KT&G Begins CEO Selection Process Since Last Month
FCP: "Most Problematic Among the Three Privatization Brothers"
National Pension Service Contrasts with Interference in KT and POSCO Personnel Affairs
The National Pension Service (NPS), which had previously intervened in the CEO selection processes of KT and POSCO, has come under scrutiny this time for not intervening. The controversy was sparked when Flashlight Capital Partners (FCP), a private equity fund and shareholder of KT&G?another widely held company currently undergoing its next CEO selection process?issued a statement urging, "The NPS should not grant preferential treatment compared to KT and POSCO and should adhere to consistent principles." Widely held companies are those that were formerly government-invested or public enterprises but became widely held after privatization. The NPS is the third-largest shareholder of KT&G.
On the 4th, Yuseon-gyu, Managing Director of FCP, told Asia Economy in a phone interview, "The current CEO, Baek Bok-in, whose operating profit and stock price have both declined during his tenure, is in a position to easily secure a fourth term." He added, "The NPS actively intervened in KT and POSCO, which showed good performance and stock prices, but it is incomprehensible that it remains silent on KT&G, which is the most problematic company, which is why we issued the statement." Earlier, on the 3rd, FCP publicly criticized the NPS through a statement, saying, "Among the privatization trio (KT, POSCO, KT&G), the NPS remains silent only on the worst, KT&G." Baek, who first assumed the CEO position in 2015, succeeded in renewing his term in 2018 and 2021, continuing the longest-serving CEO record in the company's history.
Since last month, KT&G, which has begun the process of selecting the next CEO, shortlists candidates through the Governance Committee composed of five out of six outside directors. The final candidate will be selected by the CEO Candidate Recommendation Committee, which consists of all six outside directors. The CEO will then be appointed following a board resolution. All outside directors were appointed during Baek’s tenure. If the process continues as is, FCP claims that Baek’s fourth term is a foregone conclusion. In response, Lim Min-gyu, Chairman of KT&G’s Board of Directors, stated, "We plan to proceed transparently, communicating with shareholders based on fairness and objectivity under the principle of maximizing all shareholders’ interests and the company’s future value."
POSCO Holdings, which is also conducting its next CEO selection process, faced similar controversy. Criticism arose that the CEO Candidate Recommendation Committee was composed of outside directors appointed during the tenure of the current chairman, Choi Jeong-woo, raising concerns of favoritism. Kim Tae-hyun, Chairman of the National Pension Service, said through media outlets that "the procedure is not fair," and after this remark, Choi Jeong-woo stepped down, leading to speculation that the NPS exerted influence. At the end of 2022, the NPS publicly opposed the reappointment of KT’s then-CEO Koo Hyun-mo under the name of the Fund Management Headquarters Director. Koo eventually resigned voluntarily. Managing Director Yuseon-gyu said, "KT&G is a company with governance issues similar to other widely held companies and also lacks CEO performance," adding, "The NPS’s silence is a double standard."
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